AER (Annual Equivalent Rate)
What is AER?
AER stands for Annual Equivalent Rate. It’s a standardised way of showing how much interest (money a bank pays you for keeping savings with them) a savings account pays over a year. Every UK savings account must show its AER, which makes comparing accounts straightforward.
Why does AER exist?
Banks pay interest at different intervals. Some monthly, some yearly, some only when the account matures. Without a standard measure, comparing them would be confusing.
AER solves this by showing what you’d earn over a full year, including the effect of compounding (earning interest on your interest). A 5% AER means £50 per year on every £1,000. Regardless of when the bank actually pays it.
AER vs gross rate
You might also see a “gross rate” quoted. This is the simple interest rate before compounding. If interest is paid yearly, the gross rate and AER are the same. If interest is paid monthly, the AER will be slightly higher because you’re compounding more often.
For comparing accounts, always use AER. That’s what it’s for.
Scrimpr tracks savings rates daily across UK banks and building societies.
Compare Savings Rates →Key points about AER
- Standard measure for comparing savings rates
- Includes the effect of compounding
- 5% AER = £50 per year on £1,000
- Always compare AER to AER, not gross rates
More information
Scrimpr links to official sources so you can verify what you’ve learned.